TaxTMI 
TaxTMI 
2009 (11) TMI 508
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.... disputes over whether all the facilities under the contract were made available by the Petitioner to the Respondent. On 29-8-2008 the Petitioner, while recognizing deficiencies, offered to extend the duration of the contract as compensation. The Respondent by its e-mail of 2nd September, 2008 agreed to accept the compensation recommended and proceeded to state that a formal amendment to the contract ought to be signed by the parties. The Petitioner by a communication of 26-9-2008 recorded that a revised duration issued as agreed towards compensation, was being forwarded to the Respondent. The term of the contract between the parties was to commence on 22-5-2008 and was to conclude on 31-7-2009. The term was extended by a formal amendment t....
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....nding up. It has been urged that no debt can be held to be due and payable unless the extent or loss of damages has been ascertained. 4. On the other hand, it has been submitted on behalf of the Petitioner that even if the provision of the contract is held to be in the nature of liquidated damages, in view of the judgment of the Supreme Court in Oil & Natural Gas Corpn. Ltd. v. S AW Pipes Ltd. [2003] 44 SCL 89 , the Petitioner would be entitled to claim the sum named by the parties in the contract unless it is held to be unreasonable or by way of penalty. In the present case it was urged that there is no defence to the effect that the sum named is either unreasonable or by way of penalty. Learned counsel submitted that in terms of the cont....
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.... to pay to E-City Media on demand the entire Royalty/MG amount mentioned in this Agreement with interest at 18 per cent per annum." 6. The Petitioner terminated the contract by its communication dated 19-12-2008 in view of defaults allegedly committed by the Respondent in making payments due under the contract. Clause 8 of the agreement provides that in the event that the Respondent fails to make payment for a period of any one month during the term of the agreement, the Petitioner would be at liberty to terminate the agreement with notice of seven days. In that event, the Respondent is obligated to make good the losses and damages which may be suffered by the Petitioner. On the occurrence of such an event, the Respondent is liable to pay ....
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....t. (ii)In regard to a claim for damages (whether liquidated or unliquidated), there is no 'existing obligation' to pay any amount. No pecuniary liability in regard to a claim for damages, arises till a Court adjudicates upon the claim for damages and holds that the defendant has committed breach and has incurred a liability to compensate the plaintiff for the loss and then assesses the quantum of such liability. An alleged default or breach gives rise only to a right to sue for damages and not to claim, any 'debt'. A claim for damages becomes a 'debt due', not when the loss is quantified by the party complaining of breach, but when a competent court holds on enquiry, that the person against whom the claim for damages is made, has committed....
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....med in the contract unless it is held that the estimate of damages is unreasonable or by way of penalty. Paragraph 55 of the judgment which lays down the propositions of law contains the following observations : "55. From the aforesaid discussions, it can be held that: (1)Terms of the contract are required to be taken into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same. (2)If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that is what is provi....
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....ount of damages for breach, the claim by its very nature requires adjudication by the Court. In Saw Pipes Ltd.'s case (supra) as the facts of the case show, the proceedings before the Supreme Court arose upon an arbitral award which was challenged before the High Court under section 34 of the Arbitration and Conciliation Act, 1996. There was in that case an adjudication on the question of damages. 11. If the clause in the present case is regarded as being a clause which stipulates the payment of a named sum by way of liquidated damages a debt will become crystallized only upon an adjudication of damages in a suit. Prior to an adjudication, it still constitutes a claim for damages. The decree of the Court is what transforms the claim into a....